One popular definition of a value investment is a company with operations that run counter to present trends or fashions. Such a company is the money-transfer giant The Western Union (NYSE: WU).

Western Union processes payments the old fashioned way. Its customers have to go to a brick and mortar location and hand over cash that gets wired somewhere. Even though this seems terribly old-fashioned to many people, it is a huge business.

The World Bank estimated that remittances; money sent from people in first world nations like the USA to developing countries such as Guatemala, would reach $610 billion in volume in 2016 and $636 billion in volume in 2017. Much of that money is sent via wire transfer, and the World Bank found the market is growing.

One company that noticed this market is Walmart Stores Inc. (NYSE: WMT); which started offering its own money transfers in 2014. A growing portion of wire transfer is serving as an interface between the unbanked; persons without bank accounts, and the financial services industry.

A Growing Market with Lots of Competition

The Federal Deposit Insurance Corporation (FDIC) estimated that 7.7% of US households were unbanked and 20% were underbanked in 2013. An underbanked household has access to only limited financial services such as a savings account. If these figures are accurate there are around 34.5 million unbanked and underbanked households in the United States all of which are potential customers for Western Union.

Families without bank accounts still need to pay the electric bill and the car insurance. Some of them also need to send money to Cousin Bob or Uncle Eddy, that’s where Western Union comes in. Companies like Western Union still have a vast potential market and a huge amount of competition.

In addition to Walmart, Western Union now faces stiff competition from credit card companies like American Express (NYSE: AXP), Visa (NYSE: V), MasterCard (NYSE: MA) and Capital One (NYSE: COF). All of those brands offer products for the unbanked in the form of gift cards, preloaded cards and secured credit cards.

Western Union’s Days are numbered

It also faces a growing threat from online payment processors like PayPal Holdings (NASDAQ: PYPL). PayPal bought the online money transfer service Xoom; shortly after it went public again, last year.

PayPal also owns the money-transfer app Venmo; which is an even greater threat to Western Union because it offers direct money transfer via smartphones at the push of a button. Since almost everybody has a smartphone these days, it is easy to conclude that Western Union’s days are numbered.

Despite that something very odd happened on the way to the future. Western Union’s stock value suddenly started going up. The company’s stock was trading at $18.91 a share on June 27, 2016, and $20.27 a share on September 16, 2016. Mr. Market decided he liked this company; is he right, is Western Union a value investment?

Is Western Union a Value Investment?

The strange answer to that question is perhaps, the financial numbers indicate that Western Union has a lot more potential value than many people give it credit for. The latest financial numbers; those from June 30, 2016, do contain some good news including:

$5.433 billion in revenues.

$835.9 million in in net income.

A profit margin of 14.95%

A free cash flow of $212.1 million.

Assets of $9.395 billion.

Cash and short term investments of $2.461 billion.

$1.0191 billion.

Western Union is making a lot of money and generating a lot of float for its size. It’s also easy to see why its stock value is going up. Ycharts reported that investors were rewarded with a dividend yield of 3.13% and a return on equity of 63.2% on September 16, 2016.

Western Union shareholders received a 16¢ dividend on June 30, and are scheduled to receive the same amount again on September 30, 2016. Making this a pretty good low-cost dividend stock; in an interesting and often-neglected corner, of the financial services sector.

Okay, cynics will say that much of that dividend yield was the result of the share price increase and they would be right. The revenue figures show that Western Union’s future is very gloomy.

Why Western Union Might be Doomed

Western Union’s biggest problem is its revenue which has been steadily going down over the two years. The company reported revenues of $5.587 billion in June 2014; shortly after Walmart entered the money-transfer business in April 2014; that fell to $5.555 billion in June 2015 and $5.4353 billion in June 2016.

A man leaves a Western Union agency in Havana, Cuba, Tuesday, Dec. 28, 2010. Cubans who rely on remittances from abroad are hailing a U.S. policy change that means they now can receive transfers in the island’s convertible currency instead of dollars, sidestepping a 10 percent exchange surcharge. Top left a photo of Cuban revolutionary hero Camilo Cienfuegos is stuck to a glass. (AP Photo/Franklin Reyes)

That equals a revenue decline of $134 million in two years which is obviously bad for a company with just $5.453 billion revenues. Western Union bulls that the company has seen such drops before and recovered from them revenues rose to $5.661 billion in June 2012 and fell to $5.558 billion in June 2013 before recovering to $5.587 billion in 2014.

The problem is that the latest revenue drop appears to be steady and ongoing. It looks as if a significant portion of Western Union’s business is slowly but steadily disappearing. This is beginning to affect the net income which fell from $848.8 million in June 2015 to $835.9 million in 2016.

Is Western Union a Takeover Target?

That means the long-term prospects for this company are limited even though it is generating a lot of cash. My prediction is that Western Union will become a takeover target at some point because of the cash and the low price. It had a market cap of $9.886 billion and an enterprise value of $10.68 billion on September 16, 2016.

That might make it a target for Berkshire Hathaway (NYSE: BRK.B); which likes such cash rich infrastructure companies, or for an established payment processor such as PayPal. Western Union’s brick and mortar locations and wire transfer system would be good fit with PayPal’s growing payment ecosystem, particularly Venmo, Xoom and the retail payments specialist Braintree.

Western Union is also a good low cost value investment because of the return on equity. Although I recommend that investors stay away because it is a little overpriced right now. Expect this stock to make some sudden movements up or down in coming months, especially if takeover rumors start flying.